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Division A and Division B are divisions of the same group. Division A transfers all of its output to Division B.
Which THREE of these alternative transfer pricing bases will prevent any cost inefficiencies in Division A being passed on to Division B?
Suggested Answer: A, D, F
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28 comments · newest first
AN
Angella
7 months ago
F) Standard variable cost plus a profit margin could work too, but it might complicate things.
ER
Ernie
8 months ago
E) Actual variable cost seems fair. It avoids unnecessary overheads.
RU
Rupert
8 months ago
I think D) Market price is the best choice. It reflects true market value.
EM
Emilio
8 months ago
Totally agree with A and D!
MA
Mariann
9 months ago
Wait, can we really avoid inefficiencies with these options?
SH
Shawna
9 months ago
E) Actual variable cost seems solid too.
LE
Leontine
9 months ago
I think D) Market price is the way to go!
GE
Gearldine
9 months ago
Haha, imagine if they went with "Actual Clown Cost" as an option. That would be a real circus!
LE
Levi
9 months ago
Hmm, A, D, and F look like the winners here. Can't have those pesky inefficiencies creeping in.
TO
Tony
9 months ago
A, D, and F are the way to go. Gotta keep that Division B happy!
LA
Lavonna
10 months ago
I’m leaning towards saying standard variable cost plus a profit margin is a good choice, but I can’t recall if it fully prevents inefficiencies.
JO
Joesph
10 months ago
I practiced a similar question where we had to choose between actual full cost and actual variable cost, and I think actual variable cost is more efficient.
GI
Gilma
10 months ago
I think standard variable cost might be one of the answers, but I’m a bit confused about how it compares to actual costs.
LA
Lachelle
10 months ago
I'd go with A, D, and F. Actual costs could still pass on inefficiencies.
PO
Pok
10 months ago
A, D, and F seem like the best options to prevent cost inefficiencies.
RO
Rozella
10 months ago
A) Standard variable cost is a good choice.
ME
Melinda
11 months ago
I prefer A) Standard variable cost. It keeps things simple and efficient.
LO
Lottie
11 months ago
I remember discussing how using market price could help avoid inefficiencies, but I’m not sure if it’s the only option.
JE
Jesusa
11 months ago
This is a good question to test our understanding of transfer pricing. I feel pretty confident I can identify the three correct options here.
IS
Isidra
12 months ago
Ah, I see now. Actual variable cost and standard variable cost plus a profit margin would also work to avoid passing on inefficiencies. Gotta remember those.
MA
Marleen
12 months ago
I'm a bit confused on the difference between actual full cost and actual prime cost. I'll need to review those options more closely.
UN
Una
12 months ago
Okay, I think I've got this. Standard variable cost and market price should prevent any inefficiencies from being passed on.
MO
Moon
1 year ago
Hmm, this seems like a tricky one. I'll need to think through the different transfer pricing bases and how they impact cost inefficiencies.
AN
Angella
7 months ago
I agree, market price is the safest bet here.
BR
Brock
7 months ago
Actual full cost seems risky, though.
LE
Leota
7 months ago
Standard variable cost plus a profit margin could prevent inefficiencies.
ST
Stanford
7 months ago
Actual variable cost might work too.
MI
Miriam
11 months ago
I think using market price is a good option.